GLH Golden Leaf Holdings Ltd

Golden Leaf Holdings Ltd. (CSE:GLH) (OTCQB:GLDFF) (“Golden Leaf” or the “Company”), a premiere consumer-driven cannabis company specializing in production, processing, wholesale, distribution and retail, today announced financial results for the first quarter ended March 31, 2020. All financial results are stated in US dollars, unless otherwise noted.

“The health crisis caused by COVID-19 that began during the first quarter of 2020 was one of many challenges the Company overcame this quarter,” stated Jeff Yapp, Chief Executive Officer of Golden Leaf. “I am proud of the team’s ability to pivot our operations, retail model, and product line, to help re-establish Golden Leaf as a market leader in Oregon and generate record revenues.”

Q1 Financial Highlights:

• Record quarterly revenues from continuing operations of $4.7M, an increase of 21% compared to the first quarter of 2019 and 34% compared to the fourth quarter of 2019. This increase was led by record first quarter Chalice Farms retail revenues of $3.1M which was driven by an increase in total tickets of 19% compared to the first quarter of 2019 and 7% compared to the fourth quarter of 2019.
• Adjusted EBITDA loss of $0.9M, an improvement of $1.1M, or 55%, year-over-year, and an improvement of $1.3M, or 59%, compared to the 2019 run rate adjusted EBITDA
• Gross profit of $1.7M was a 21% improvement from gross profit of $1.4M from same period 2019.
• Lowered operating expenses to $3.3M, a reduction of $1.2M, or 26% year over year

“The Company continues to take a more disciplined approach to growth and working capital utilization, resulting in better supply chain control in purchasing, inventory management and production,” continued Yapp. “We have extended terms with vendors, dramatically improved warehouse efficiencies and collections, reduced receivables, and cut operating expenses.”

Q1 Business Highlights:

• On January 8, 2020, the Company launched a full-spectrum version of the popular Rick Simpson cannabis oil extracts, the RXO product line, utilizing Essential Innovations patented technology.
• As reported on February 3, 2020, the Company announced it had entered into an agreement to acquire Tozmoz, LLC, one of Oregon’s premier cannabis extractors. On March 20, 2020, the Company accelerated the launch of home delivery service in preparations for the upcoming concerns of COVID-19 in Oregon. Both Powell and Country Store retail locations offer this service, with more stores coming soon. On March 23, 2020 Governor Kate Brown announced a “Stay Home, Stay Healthy” order closing all non-essential businesses. Being considered essential, our retail stores began practicing social distancing, increased cleaning regiments, and continued to service our customers in a safe and healthy way.
• On March 13, 2020, the Company signed a Product Manufacturing and Distribution Agreement with Sugar Pine (i.e., A New Leaf Production Center, LLC, a Nevada limited liability company) to produce marijuana-infused products for the Company under Nevada law, for sale and distribution in Nevada.
• Beginning March 23, 2020, launched curbside pickup at our retail stores to limit crowds, placing more emphasis on online ordering.

Fiscal First Quarter Ended March 30, 2020 Financial Results

For the three months ended March 31, 2020 (“Q1 2020”), total revenue from continuing operations was $4.7 million, as compared to $3.9 million for the same period in 2019 (“Q1 2019”). The 19% year-over-year increase largely reflects improvements in the Oregon retail and wholesale businesses. Gross profit was $1.7 million, or 37% of total revenue for Q1 2020, compared with $1.4 million, or 37% of total revenue, in Q1 2019.

Operating expenses were $3.3 million for Q1 2020, compared with $4.4 million in Q1 2019, an improvement of $1.1 million, or 26%. Cash-based operating expenses of $2.6 million in Q1 2020 were 53% of total revenue, compared with $3.4 million in Q1 2019, or 87% of total revenue. The reduction in operating expenses was due primarily to decreased salaries, wages, and share-based compensation and more significant than the cost reduction measures that were taken in Q1 2019.

Adjusted EBITDA loss was $0.9 million for Q1 2020, compared with a loss of $2.0 million for Q1 2019, a 55% improvement. This measure is primarily driven by the increase in gross profit and the reduction in cash-based operating expenses for the period. The Company considers Adjusted EBITDA an important operational measure for the business. Net loss from continuing operations for Q1 2020 was $2.5 million, compared to $3.1 million for Q1 2019, driven primarily by increased gross profit. See the management discussion and analysis for Q1 2020 as filed on SEDAR for a description of Adjusted EBITDA.

As of March 31, 2020, the Company offers, directly and through its partners, over 100 SKUs across 13 product lines in three jurisdictions: Oregon, California, and Nevada.

Investor Conference Call

Golden Leaf Holdings – 2020 First Quarter Earnings Call

Golden Leaf management, led by Mr. John Varghese, Executive Chairman and Mr. Jeff Yapp, Chief Executive Officer, will hold a conference call on Thursday, May 21, 2020 at 5:30pm ET, to report its financial results for Q1 ended March 31, 2020. Please click here to register and stream the call, or use the following phone numbers:

Toll Free: 1-800-458-4148

Toll/International: 1-323-794-2093

A live audio webcast will be available online on the Company’s website at www.goldenleafholdings.com where it will be archived for one year.

An audio replay of the conference call will be available through midnight Thursday, June 4, 2020 by dialing 1-844-512-2921 from the US or Canada, or 1-412-317-6671 from international locations. The conference ID: 5528535.

About Golden Leaf Holdings

Golden Leaf Holdings is a premiere consumer-driven cannabis company specializing in production, processing, wholesale, distribution and retail, with seven dispensaries in Portland, Oregon. The Company is committed to developing a dynamic portfolio built around the recognized brands of Chalice Farms, with a focus on health and wellness.  Markets served include Oregon, California, Nevada and Washington. Visit glhmonthly.com for regular updates.

Investor Relations:

John VargheseExecutive ChairmanGolden Leaf Holdings Ltd.971-371-2685ir@goldenleafholdings.com

Disclaimer: This press release contains “forward-looking information” within the meaning of applicable securities legislation. Forward-looking information includes, but is not limited to, statements with respect to the Company’s future business operations, the opinions or beliefs of management and future business goals. Generally, forward looking information can be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved”. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking information. These risks include but are not limited to general business, economic and competitive uncertainties, regulatory risks, market risks, risks inherent in manufacturing and retail operations such as unforeseen costs and production shutdowns, difficulties in maintaining brand loyalty, and other risks of the cannabis industry. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward looking information. Forward-looking information is provided herein for the purpose of presenting information about management’s current expectations relating to the future and readers are cautioned that such information may not be appropriate for other purpose. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws. This press release does not constitute an offer of securities for sale in the United States, and such securities may not be offered or sold in the United States absent registration or an exemption from registration or an exemption from registration.

Neither the Canadian Securities Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Exchange) accepts responsibility for the adequacy or accuracy of this release.

GOLDEN LEAF HOLDINGS LTD.
Interim Condensed Consolidated Statement of Financial Position (Unaudited)
As at March 31, 2020 and December 31, 2019
(Expressed in U.S. dollars)
		March 31, 2020				December 31, 2019
CURRENT
Cash		$	1,543,102			$	3,531,202
Accounts receivable	Note 6		259,424				167,178
Other receivables	Note 6		452,273				447,901
Income tax recoverable			6,497				74,034
Sales tax recoverable			283,331				271,866
Biological assets	Note 8		183,928				88,078
Inventory	Note 8		3,705,769				2,965,304
Prepaid expenses and deposits			558,469				325,329
Total current assets			6,992,793				7,870,892
Property, plant and equipment	Note 9		3,412,671				3,723,489
Notes receivable	Note 7		919,488				919,488
Right-of-use assets, net	Note 10		4,400,294				4,333,064
Intangible assets	Note 11		10,737,423				10,737,423
Goodwill	Note 11		4,056,172				4,056,172
Total assets			30,518,841				31,640,528
LIABILITIES
CURRENT
Accounts payable and accrued liabilities			2,135,555				1,564,982
Interest payable			304,699				125,900
Income taxes payable			314,789				-
Deferred income tax payable			248,852				248,852
Sales tax payable			11,282				187,520
Current portion of long-term debt	Note 13		76,173				82,404
Lease liability	Note 13		920,877				843,238
Total current liabilities			4,012,227				3,052,896
Long term debt	Note 13		29,952				29,952
Long term lease liability	Note 13		4,185,920				4,090,806
Convertible debentures carried at fair value	Note 12		4,706,141				4,706,141
Consideration payable - cash portion	Note 13		4,286,978				4,218,866
Consideration payable - equity portion	Note 13		4,897,507				4,940,667
Total liabilities			22,118,725				21,039,328
SHAREHOLDERS' EQUITY
Share capital	Note 14		147,873,002				147,763,499
Warrant reserve	Note 15		1,553,850				1,980,217
Share option reserve	Note 16		4,082,010				4,181,350
Contributed surplus			59,940				59,940
Deficit			(145,168,686	)			(143,383,806	)
Total shareholders' equity			8,400,116				10,601,200
Total liabilities and shareholders' equity		$	30,518,841			$	31,640,528

GOLDEN LEAF HOLDINGS LTD.
Interim Condensed Consolidated Statements of Operations and Comprehensive Gain (Loss) (Unaudited)
For the three months ended March 31, 2020 and 2019
(Expressed in U.S. dollars)
		For the three months ended March 31,
		2020				2019
Revenues
Product sales	Note 21	$	4,239,582			$	3,728,959
Consulting revenue	Note 21		430,722				202,070
Total Revenue			4,670,304				3,931,029
Inventory expensed to cost of sales	Note 8, 21		2,964,192				2,364,969
Production costs	Note 21		0				128,577
Gross margin, excluding fair value items			1,706,112				1,437,484
(Gain) loss on changes in fair value of biological assets	Note 8, 21		(20,714	)			-
Gross profit			1,726,826				1,437,484
Expenses
General and administration			2,045,274				2,774,831
Share based compensation	Note 16		129,579				411,926
Sales and marketing			535,026				628,685
Depreciation and amortization	Note 9		568,345				630,849
Total expenses			3,278,224				4,446,291
Loss before items noted below			(1,551,398	)			(3,008,807	)
Interest expense			551,101				731,001
Transaction costs			-				6,108
Loss (gain) on disposal of assets	Note 9		7,822				(16,945	)
Other income			(28,438	)			(141,197	)
Gain on change in fair value of warrant liabilities			-				(499,662	)
Gain on change in fair value of convertible debentures	Note 12		-				(36,169	)
Loss before income taxes			(2,081,883	)			(3,051,943	)
Current income tax expense			358,283				11,624
Net loss from continuing operations		$	(2,440,166	)		$	(3,063,567	)
Income from discontinued operations	Note 7		-				17,524
Net loss		$	(2,440,166	)		$	(3,046,043	)
Other comprehensive loss
Items that will be reclassified subsequently to profit or loss:
Cumulative translation adjustment			-				892,214
Comprehensive loss		$	(2,440,166	)		$	(3,938,257	)
Basic and diluted loss per share from continuing operations		$	(0.00	)		$	(0.01	)
Basic and diluted loss per share from discontinued operations		$	-			$	0.00
Weighted average number of common shares outstanding			859,890,063				534,900,058

Adjusted EBITDA
	For the three months ended
	March 31, 2020				March 31, 2019
Loss before income taxes		(2,081,883	)			(3,051,943	)
Adjustments:
Net impact, fair value of biological assets		(20,714	)			-
Depreciation and amortization		568,345				630,849
Fair value changes on debt and equity instruments		-				(535,831	)
Share based compensation		129,579				411,926
Interest expense, net		551,101				731,001
Transaction costs		-				6,108
Impairments and other		(28,438	)			(141,197	)
Loss on disposal		7,822				(16,945	)
Adjusted EBITDA loss	$	(874,188	)		$	(1,966,032	)